New Housing Starts Fall 16%, Thanks To Cold Wave Winter

Groundbreaking on new U.S. homes dropped 16% in January compared to December, and dipped 2% lower than their level one year earlier, data released by the government today shows. The decrease had been widely expected, thanks to January’s cold and stormy weather.

New home starts in January were at an annual rate of 880,000 (seasonally adjusted), well below December’s revised estimate of 1,048,000. In January 2013, the annualized rate was 898,000 (seasonally adjusted). The rate of groundbreaking on single-family homes, by far the largest piece of the market, saw a 15.9% dip in January compared to December.

The news comes just a couple months after groundbreakings were at a particularly strong level: in November the rate of new housing starts hit its highest level in five years. Ahead of today’s report, economists predicted a drop in new construction due to the harsh winter. Market watchers also blame the slowing on increased mortgage rates.

Indeed, the rate of new groundbreakings fell most precipitously in the snow-covered Midwest, where the pace dropped 67.7% (seasonally adjusted annual rate) in January compared to December. The pace of groundbreakings fell 12.5% in the South, which has also been hit hard by winter weather this year. The West saw groundbreaking slow 17.4% in January. Only the staunch Northeast increased its rate of groundbreakings, with 61.9% (seasonally adjusted annual rate)more starts in January compared to December.

Each month the U.S. Census Bureau and the Department of Housing and Urban Development measures construction activity on new residences—single-family homes, townhomes or condos, and apartment buildings of at least five units. The government report includes data on building permits, housing starts (meaning groundbreakings) and housing completions.

Permits--which are an indicator for future construction of new residences—also dipped in January compared to December, by 5.4% to a seasonally adjusted annual rate of 937,000. However, this rate is still 2.4% above the rate in January 2013.